TIDMJOG

RNS Number : 6166J

Jersey Oil and Gas PLC

28 April 2022

28 April 2022

Jersey Oil and Gas plc

("Jersey Oil & Gas", "JOG" or the "Company")

Final Results for the year ended 31 December 2021

and Notice of Annual General Meeting

Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its audited results for the financial year ended 31 December 2021 and the time and date of its forthcoming Annual General Meeting ("AGM").

Highlights

-- The Company has aggregated a significant oil and gas resource base in the Central North Sea, the "Greater Buchan Area" ("GBA")

-- JOG launched its GBA farm-out process and is actively engaged with multiple counterparties

-- Farm-out activities have intensified with JOG broadening the development solutions under ongoing evaluation with the various interested parties

-- Work completed by the Company during the year is facilitating an accelerated technical evaluation of the alternative development options under consideration

-- Key pre-FEED operations completed during the year

-- Strengthened Board and senior management team with significant industry experience

-- Year-end cash position of approximately GBP13.0 million, with no debt

Andrew Benitz, CEO of Jersey Oil & Gas, commented :

"2021 was an active and exciting year for the Company, most notably involving the commencement of our Greater Buchan Area farm-out process. Interest in developing the GBA has been strong and we are actively engaged with multiple serious counterparties. Since launching the process our engagement strategy has been broadened to advance a range of competing development solutions, providing increased optionality.

"The GBA is a high-quality, development ready UK North Sea resource base of scale and we look forward to concluding the farm-out process and moving into the next phase of activities. The Company remains well funded as we progress at pace to deliver stakeholder value through securing a successful farm-out to ensure this exciting project can be developed in the most economic and sustainable manner."

Corporate Update

JOG has aggregated a significant oil and gas resource base in the heart of the Central North Sea. As the sole owner of the GBA, the Company has the control and flexibility to advance an optimal new development capable of unlocking substantial long-term shareholder value. To this end, the next major step for JOG is to secure an industry partner(s) in order to move the development into the next phase of activities and secure the regulatory approvals in 2023 for execution of the project.

GBA Focus

-- JOG is actively engaged with multiple high quality interested parties regarding the planned farm-out of an interest in the GBA

-- Work is progressing to expand the development options in order to facilitate the farm-out process, with opportunities to utilise existing infrastructure for future production from the GBA under evaluation

-- Engineering studies are being completed in collaboration with the various counterparties in order to validate and de-risk the different development solutions and facilitate the negotiation of commercial constructs for the GBA farm-out

-- The range of competing development solutions, including tie-backs to existing platforms and re-use of available FPSO's, has the potential to enhance the overall development economics

-- Upon confirmation and selection of the optimal GBA development scheme the project will then move into Front-End Engineering & Design ("FEED") activities along with preparation of the required Field Development Plan for the North Sea Transition Authority (formerly, the Oil & Gas Authority)

-- Pre-FEED operational work included JOG completing an offshore survey to support Phase 1 of the GBA Development project. The survey acquired geotechnical and environmental baseline data within the GBA

-- The GBA development solution that is taken forward for regulatory approval will seek to deliver upon both of the industry's strategic objectives of "Maximising Economic Recovery" and "Net Zero"

Supportive Macro Environment

-- Recent geopolitical events, exacerbated by recent under investment in the upstream sector, have led to a material escalation in oil and gas prices that has served to underline the importance of maximising domestic energy supplies

-- The UK North Sea has only a limited number of readily executable oil and gas developments with the resource scale of the GBA

Attractive Outlook

-- Progressing the GBA development project remains JOG's number one priority with a singular focus on converting value in the GBA through industry partnership

-- Opportunities to accelerate the Company's corporate growth strategy through the execution of potential accretive acquisitions continue to be screened and evaluated

-- The Company remains well funded with current expenditure primarily related to workstreams that will facilitate securing a successful farm-out

-- Strengthened the team with the appointments of Les Thomas as Non-Executive Chairman, Graham Forbes as Chief Financial Officer and Richard Smith as Chief Commercial Officer

Availability of Annual Report and Accounts and Notice of Annual General Meeting

In addition, the Company announces that its 2021 Annual Report and Financial Statements, together with the AGM Notice and associated Form of Proxy, are now available on the Company's website (www.jerseyoilandgas.com) and have today been posted to those shareholders who have elected to receive hardcopy shareholder communications from the Company.

The Company will hold its AGM in respect of its financial year ended 31 December 2021 on Thursday, 26 May 2022 at 2.00 p.m. at the offices of Pinsent Masons LLP, 30 Crown Place, Earl Street, London EC2A 4ES.

Enquiries :

Jersey Oil and Gas plc

Andrew Benitz, CEO - c/o Camarco Tel: 020 3757 4983

Strand Hanson Limited

James Harris / Matthew Chandler / James Bellman Tel: 020 7409 3494

Arden Partners plc

Paul Shackleton Tel: 020 7614 5900

finnCap Ltd

Christopher Raggett / Tim Redfern Tel: 020 7220 0500

Camarco

Billy Clegg / James Crothers Tel: 020 3757 4983

Notes to Editors :

Jersey Oil & Gas is a UK E&P company focused on building an upstream oil and gas business in the North Sea. The Company holds a significant acreage position within the Central North Sea referred to as the Greater Buchan Area ("GBA"), which includes operatorship and 100% working interests in blocks that contain the Buchan oil field and J2 oil discovery and an 100% working interest in the P2170 Licence Blocks 20/5b & 21/1d, that contain the Verbier oil discovery and other exploration prospects.

JOG is focused on delivering shareholder value and growth through creative deal-making, operational success and licensing rounds. Its management is convinced that opportunity exists within the UK North Sea to deliver on this strategy and the Company has a solid track-record of tangible success.

Forward-Looking Statements

This announcement may contain certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas sector. Whilst the Company believes any expectations reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to factors beyond the Company's control or otherwise within the Company's control but where, for example, the Company decides on a change of plan or strategy.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended.

CHAIRMAN & CHIEF EXECUTIVE OFFICER'S REPORT

Overview

During 2021, JOG made good progress in advancing its primary objective of unlocking value from the Greater Buchan Area ("GBA") development project. The hard work and effort of our team on multiple work streams has positioned the Group well; defining the unique investment opportunity the GBA offers, with the significant proven oil resources providing attractive economics and flexibility for various development options, in the heart of the Central North Sea.

Portfolio With Scale

The Group has constructed a quality portfolio of assets that form the GBA in the Outer Moray Firth area of the UK North Sea. It represents a near full-cycle portfolio of assets, underpinned by the Buchan Oil field and the J2 and Verbier oil discoveries, along with three high impact and drill-ready exploration prospects; Verbier Deep, Wengen and Cortina.

In addition to contingent oil resources of in excess of 100mmbbls in the planned first phase development of the Greater Buchan Area, our shareholders have ownership of significant resource upside from further development phases and the drill-ready exploration prospects that are proximal to the core project. As an indication of confidence in our ability to deliver value for shareholders, the Group raised GBP16.61m (gross) through an oversubscribed placing and subscription in March 2021, providing strength and flexibility to advance the project to the next phase.

A standalone GBA platform development concept was prepared and a Concept Select Report ("CSR") submitted to the North Sea Transition Authority ("NSTA"). The CSR was focused on meeting the NSTA's twin strategic objectives of 'Maximising Economic Recovery' and contributing to the Government target for 'Net Zero' and it was used to launch an industry farm-out process, as a project of this scale requires multiple partners and funding components for successful delivery.

GBA Farm-Out Advancing

The farm-out process is generating interest from a wide variety of producers and infrastructure owners. Initial engagement and screening has led to JOG being actively engaged with multiple serious counterparties of scale, with ongoing due diligence involving two-way collaborative workstreams. Work is progressing to assess various development concepts that can facilitate the farm-out, including using existing third-party host infrastructure and facilities to enhance overall development economics through synergies and cost savings. The associated recoverable volumes from the GBA will naturally be dependent on the development solution that is taken forward. Opportunities to optimise forecast production and capital expenditure requirements represent a core component of the evaluations. The work completed during 2021 on the platform development concept has accelerated the technical evaluation of these further options.

Completing the assessment of the wider set of development solutions for the GBA is naturally an important driver for delivering stakeholder value from the project and a task the Group is working on with pace to progress.

The Group remains well funded with a cash balance at the end of 2021 of approximately GBP13 million and with current expenditure focused on workstreams that will facilitate securing a successful farm-out.

Positive Macro Environment

It has been a volatile year for sentiment in the oil and gas sector and in the lead up to "COP26" there was much debate about the future of the North Sea. We see the North Sea as a crucible for energy transition where upstream oil and gas can function effectively alongside the advancement of renewable energy, with examples of oil and gas companies leading investments into offshore wind and carbon capture, utilisation and storage ("CCUS") technologies. Indeed, offshore wind developments, facilitating the decarbonisation of offshore oil and gas infrastructure and regional electrification may likely play an important role in optimising the GBA development plans. We have put net zero considerations at the heart of our business by subscribing to the principles that underpin the North Sea Transition Deal that was announced in March 2021, and which supports the industry's transition to clean, green energy.

Recent geopolitical events have sadly served as a salutary reminder that security of energy supply remains of vital importance as the energy transition is achieved. The reality of underlying supply fundamentals, exacerbated by several years of under investment across the upstream sector and the significant and steady increase in commodity prices have served as a reminder that oil and gas is a vital component of the overall energy mix. Investment in maximising the production of indigenous, low-carbon UK resources remains crucial for security of supply and represents the best way for the UK economy to navigate the energy transition wisely, with JOG having an important part to play in this evolution. Improved commodity prices have bolstered producing company cash positions, serving to improve sector confidence and provide a helpful backdrop to the on-going GBA farm-out process.

Strong Organisation & Outlook

During 2021, JOG made several senior management and Board changes which marked the next phase in the Group's development for delivery on its key strategic ambitions. It was pleasing to be able to welcome Graham Forbes and Richard Smith into the Group as Chief Financial Officer and Chief Commercial Officer, respectively. This, combined with the smooth transition of the Chairman's role from Marcus Stanton to myself (Les Thomas), has strengthened the execution capabilities and leadership of the Group.

We have built a team of experienced professionals, with a demonstrable track record in the industry, a high-quality asset base and a comfortable funding position to work from.

The Group is therefore well positioned for success and on behalf of the Board, we would like to thank our dedicated JOG team for their accomplishments during the year and to recognise and acknowledge the ongoing support we have received from all of our shareholders and stakeholders at large.

Les Thomas

Non-Executive Chairman

Andrew Benitz

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2021

 
                                    Note                 2021         2020 
                                                          GBP          GBP 
==================================  ====  ===================  =========== 
Revenue                                                     -            - 
Cost of sales                                       (101,079)     (53,046) 
Gross loss                                          (101,079)     (53,046) 
Exploration write-off/licence 
 relinquishment                       10            (447,812)            - 
Other losses                           7                    -    (637,028) 
Administrative expenses                           (3,672,135)  (2,111,532) 
==================================  ====  ===================  =========== 
Operating loss                                    (4,221,026)  (2,801,606) 
Finance income                         6                1,807       27,937 
Finance expense                        6              (6,098)      (8,262) 
==================================  ====  ===================  =========== 
Loss before tax                                   (4,225,317)  (2,781,931) 
Tax                                    8                    -            - 
==================================  ====  ===================  =========== 
Loss for the year                                 (4,225,317)  (2,781,931) 
========================================  ===================  =========== 
Total comprehensive loss for the 
 year (net of tax)                                (4,225,317)  (2,781,931) 
Total comprehensive loss for the 
 year attributable to: 
  Owners of the parent                            (4,225,317)  (2,781,931) 
==================================  ====  ===================  =========== 
Loss per share expressed in pence 
 per share: 
  Basic                                9              (14.48)      (12.74) 
  Diluted                              9              (14.48)      (12.74) 
==================================  ====  ===================  =========== 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 December 2021

 
                                              Note           2021            2020 
                                                              GBP             GBP 
============================================  ====  =============  ============== 
Non-current assets 
Intangible assets exploration & development 
 costs                                          10     21,514,153      14,991,295 
Property, plant and equipment                   11         40,077          74,549 
Right-of-use assets                             12        185,008         197,374 
Deposits                                                   31,112          82,642 
============================================  ====  =============  ============== 
                                                       21,770,350      15,345,860 
==================================================  =============  ============== 
Current assets 
Trade and other receivables                     13        353,114         401,440 
Cash and cash equivalents                       14     13,038,388       5,081,515 
============================================  ====  =============  ============== 
                                                       13,391,502       5,482,955 
==================================================  =============  ============== 
Total assets                                           35,161,852      20,828,815 
==================================================  =============  ============== 
Equity 
Called up share capital                         15      2,573,395       2,466,144 
Share premium account                                 110,309,524      93,851,526 
Share options reserve                           19      1,397,287       2,109,969 
Accumulated losses                                   (81,551,730)    (78,509,819) 
Reorganisation reserve                                  (382,543)       (382,543) 
============================================  ====  =============  ============== 
Total equity                                           32,345,933      19,535,277 
==================================================  =============  ============== 
Liabilities 
                                                    =============  ============== 
Non-current liabilities 
Lease liabilities                               17         83,012         101,270 
============================================  ====  =============  ============== 
                                                           83,012         101,270 
==================================================  =============  ============== 
Current liabilities 
Trade and other payables                        16      2,603,707       1,069,620 
Lease liabilities                               12        129,200         122,648 
============================================  ====  =============  ============== 
                                                        2,732,907       1,192,268 
==================================================  =============  ============== 
Total liabilities                                       2,815,919       1,293,538 
============================================  ====  =============  ============== 
Total equity and liabilities                           35,161,852      20,828,815 
==================================================  =============  ============== 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021

 
                                   Called    Share premium        Share     Accumulated  Reorganisation 
                                       up          account      options          losses         reserve          Total 
                            share capital              GBP      reserve             GBP             GBP         equity 
                                      GBP                           GBP                                            GBP 
====================  ===================  ===============  ===========  ==============  ==============  ============= 
At 1 January 2020               2,466,144       93,851,526    1,928,099    (75,727,888)       (382,543)     22,135,338 
====================  ===================  ===============  ===========  ==============  ==============  ============= 
Loss and total 
 comprehensive 
 loss for the year                      -                -            -     (2,781,931)               -    (2,781,931) 
Share based payments                    -                -      181,870               -               -        181,870 
====================  ===================  ===============  ===========  ==============  ==============  ============= 
At 31 December 2020 
 and 
 1 January 2021                 2,466,144       93,851,526    2,109,969    (78,509,819)       (382,543)     19,535,277 
====================  ===================  ===============  ===========  ==============  ==============  ============= 
Loss and total 
 comprehensive 
 loss for the year                      -                -            -     (4,225,317)               -    (4,225,317) 
Issue of share 
 capital                          107,251       16,457,997            -               -               -     16,565,248 
Expired share 
 options                                -                -    (909,176)         909,176               -              - 
Exercised share 
 options                                -                -    (274,230)         274,230               -              - 
Share based payments                    -                -      470,725               -               -        470,725 
====================  ===================  ===============  ===========  ==============  ==============  ============= 
At 31 December 2021             2,573,395      110,309,523    1,397,287    (81,551,730)       (382,543)     32,345,933 
====================  ===================  ===============  ===========  ==============  ==============  ============= 
 

The following describes the nature and purpose of each reserve within owners' equity:

 
Reserve              Description and purpose 
==================  ============================================================= 
Called up share      Represents the nominal value of shares issued 
 capital 
==================  ============================================================= 
Share premium        Amount subscribed for share capital in excess of nominal 
 account              value 
==================  ============================================================= 
Share options        Represents the accumulated balance of share-based 
 reserve              payment charges recognised in respect of share options 
                      granted by the Company less transfers to accumulated 
                      deficit in respect of options exercised or cancelled/lapsed 
==================  ============================================================= 
Accumulated losses   Cumulative net gains and losses recognised in the 
                      Consolidated Statement of Comprehensive Income 
==================  ============================================================= 
Reorganisation       Amounts resulting from the restructuring of the Group 
 reserve              at the time of the Initial Public Offering (IPO) in 
                      2011 
==================  ============================================================= 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2021

 
                                                                      2021         2020 
                                                     Note              GBP          GBP 
=================================================  ======  ===============  =========== 
Cash flows from operating activities 
Cash used in operations                                21      (1,495,899)  (2,160,164) 
Net interest received                                   6            1,807       27,937 
Net interest paid                                       6          (6,098)      (8,262) 
=================================================  ======  ===============  =========== 
Net cash used in operating activities                          (1,500,190)  (2,140,489) 
=========================================================  ===============  =========== 
Cash flows from investing activities 
Addition of intangible assets                          10      (6,970,670)  (4,898,731) 
Purchase of tangible assets                            10                -     (84,865) 
=================================================  ======  ===============  =========== 
Net cash used in investing activities                          (6,970,670)  (4,983,596) 
=========================================================  ===============  =========== 
Cash flows from financing activities 
Principal elements of lease payments                             (137,516)    (112,936) 
Net proceeds from issue of shares                               16,565,248            - 
---------------------------------------------------------  ---------------  ----------- 
Net cash generated from/(used in) financing activities          16,427,732    (112,936) 
=========================================================  ===============  =========== 
Increase/(decrease) in cash and cash equivalents       21        7,956,873  (7,237,021) 
Cash and cash equivalents at beginning 
 of year                                               14        5,081,515   12,318,536 
=================================================  ======  ===============  =========== 
Cash and cash equivalents at end of year               14       13,038,388    5,081,515 
=================================================  ======  ===============  =========== 
 

Notes to the Consolidated Financial Statements

For the year ended 31 December 2021

1. General information

Jersey Oil and Gas plc (the "Company") and its subsidiaries (together, the "Group") are involved in the upstream oil and gas business in the UK.

The Company is a public limited company incorporated and domiciled in the United Kingdom and quoted on AIM, a market operated by London Stock Exchange plc. The address of its registered office is 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE.

2. Significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of Accounting

The consolidated financial statements of Jersey Oil and Gas Plc as of 31 December, 2021 and for the year then ended (the "consolidated financial statements") were prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 (the "Companies Act").

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. Jersey Oil and Gas Plc transitioned to UK-adopted International Accounting Standards in its consolidated financial statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework. The consolidated financial statements of Jersey Oil and Gas Plc have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to those companies reporting under those standards.

The financial statements have been prepared under the historic cost convention, except as disclosed in the accounting policies below .

Going Concern

The Group has sufficient resources to meet its liabilities as they fall due for a period of at least 12 months after the date of issue of these financial statements. Further to the equity raise completed in March 2021, the Group has substantial cash reserves with currently no firm work commitments on any of the Group's licences, other than ongoing Operator overheads and licence fees. Other work that the Group is undertaking in respect of the GBA licences and surrounding areas is modest relative to its current cash reserves. A range of potential farm-out scenarios has also been modelled to provide further comfort. The Company's current cash reserves are therefore expected to more than exceed its estimated cash outflows in all reasonable scenarios for at least 12 months following the date of issue of these financial statements. Based on these circumstances, the Directors have considered it appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements.

Changes in Accounting Policies and Disclosures

(a) New and amended standards adopted by the Group:

At the start of the year the following standards were adopted:

-- Covid-19-Related Rent Concessions (Amendment to IFRS 16);

-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);

-- IFRS3 conceptual framework amendment; and

-- Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16);

(b) Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions:

-- IFRS17 Insurance Contracts;

-- Property, Plant and Equipment: Proceeds before intended use (Amendment to IAS 16);

-- Reference to Conceptual Framework (Amendments to IFRS 3);

-- Onerous Contracts - Cost of Fulfilling a contract (Amendments to IAS 37);

-- Annual Improvements to IFRS Standards 2018-2020

Significant Accounting Judgements and Estimates

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the date of the financial statements. If in future such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The Group's accounting policies make use of accounting estimates and judgements in the following areas:

   --         The assessment of the existence of impairment triggers (note 10). 
   --         The estimation of share-based payment costs (note 19). 

Impairments

The Group tests its capitalised exploration licence costs for impairment when indicators, further detailed below under 'Exploration and Evaluation Costs' as set out in IFRS 6, suggest that the carrying amount exceeds the recoverable amount which is inherently judgmental. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount of the Cash Generating Unit is the higher of an asset's fair value less costs of disposal and value in use. The Group assessed that there were no impairment triggers during the year - this included the judgement that there was no trigger arising from future licence expiry for which we did not expect the licence concerned to be renewed.

Share-Based Payments

The Group currently has a number of share schemes that give rise to share-based payment charges. The charge to operating profit for these schemes amounted to GBP470,725 (2020: GBP181,870). Estimates and judgements for determining the fair value of the share options are required. For the purposes of the calculation, a Black- Scholes option pricing model has been used. Based on past experience, it has been assumed that options will be exercised, on average, at the mid-point between vesting and expiring. The share price volatility used in the calculation is based on the actual volatility of the Group's shares, since 1 January 2017. The risk-free rate of return is based on the implied yield available on zero coupon gilts with a term remaining equal to the expected lifetime of the options at the date of grant.

Basis of Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses the existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de facto control. De facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of holdings of other Shareholders give the Group the power to govern the financial and operating policies.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the Group ceases to have control.

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Acquisitions, Asset Purchases and Disposals

Transactions involving the purchase of an individual field interest, farm-ins, farm-outs, or acquisitions of exploration and evaluation licences for which a development decision has not yet been made that do not qualify as a business combination, are treated as asset purchases. Accordingly, no goodwill or deferred tax arises. The purchase consideration is allocated to the assets and liabilities purchased on an appropriate basis. Proceeds on disposal (including farm-ins/farm-outs) are applied to the carrying amount of the specific intangible asset or development and production assets disposed of and any surplus is recorded as a gain on disposal in the Consolidated Statement of Comprehensive Income.

Acquisitions of oil and gas properties are accounted for under the purchase method where the acquisitions meets the definition of a business combination. The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.

Acquisition related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability are recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Exploration and Evaluation Costs

The Group accounts for oil and gas exploration and evaluation costs using IFRS 6 "Exploration for and Evaluation of Mineral Resources". Such costs are initially capitalised as Intangible Assets and include payments to acquire the legal right to explore, together with the directly related costs of technical services and studies, seismic acquisition, exploratory drilling, and testing. The Group only capitalises costs as intangible assets once the legal right to explore an area has been obtained. The Group assesses the intangible assets for indicators of impairment at each reporting date.

Potential indicators of impairment include but are not limited to:

a) the period for which the Group has the right to explore in the specific area has expired during the period or will expire in the near future and is not expected to be renewed.

b) substantive expenditure on further exploration for and evaluation of oil and gas reserves in the specific area is neither budgeted nor planned.

c) exploration for and evaluation of oil and gas reserves in the specific area have not led to the discovery of commercially viable quantities of oil and gas reserves and the entity has decided to discontinue such activities in the specific area.

d) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

The Group analyses the oil and gas assets into cash generating units (CGUs) for impairment and reporting purposes. In the event an impairment trigger is identified the Group performs a full impairment test for the CGU under the requirements of IAS 36 Impairment of assets. An impairment loss is recognised for the amount by which the exploration and evaluation assets' carrying amount exceeds their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets' fair value less costs of disposal. A cost of GBP255,847 was recorded for relinquishing P2497 Block 20/4c (Zermatt), and GBP191,965 for P2499 Block 21/2a (Glenn) in the financial year ended 31 December 2021, resulting in the carrying value of both assets being GBPnil.

As at 31 December 2021, the carrying value of intangible assets was GBP21.5m, as per Note 10 'Intangible Assets'. The Group considered other factors which could give rise to an impairment trigger such as commodity prices, licence expiration dates, budgeted spend and movements in estimated recoverable reserves. The group exercised judgement in determining that the licence agreements will be likely be extended by the NSTA. Based on this assessment, no impairment triggers existed in relation to exploration assets as of 31 December 2021.

Cost of Sales

Within the statement of comprehensive income, costs directly associated with generating future revenue are included in cost of sales such as software licences that were used across the asset base. The Group only capitalises costs as intangible assets once the legal right to explore an area has been obtained, any costs incurred prior to the date of acquisition are recognised as cost of sales within the Statement of Comprehensive Income.

Property, Plant and Equipment

Property, plant and equipment is stated at historic purchase cost less accumulated depreciation. Asset lives and residual amounts are reassessed each year. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Depreciation on these assets is calculated on a straight-line basis as follows:

   Computer & office equipment      3 years 

Leases

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

-- fixed payments (including in-substance fixed payments), less any lease incentives receivable;

-- variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

   --         amounts expected to be payable by the Group under residual value guarantees; 

-- the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

-- payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

-- the amount of the initial measurement of lease liability;

-- any lease payments made at or before the commencement date less any lease incentives received;

-- any initial direct costs; and

-- restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise any lease with a value of GBP5,000 or less.

Joint Ventures

The Group participates in joint venture/operation agreements with strategic partners, these are classified as joint operations. The Group accounts for its share of assets, liabilities, income and expenditure of these joint venture agreements and discloses the details in the appropriate Statement of Financial Position and Statement of Comprehensive Income headings in the proportion that relates to the Group per the joint venture agreement.

Investments

Fixed asset investments in subsidiaries are stated at cost less accumulated impairment in the Company's Statement of Financial Position and reviewed for impairment if there are any indications that the carrying value may not be recoverable.

Financial Instruments

Financial assets and financial liabilities are recognised in the Group and Company's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. The Group does not have any derivative financial instruments.

Cash and cash equivalents include cash in hand and deposits held on call with banks with a maturity of three months or less.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any expected credit loss. The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss will be recognised in the Consolidated Statement of Comprehensive Income within administrative expenses. Subsequent recoveries of amounts previously provided for are credited against administrative expenses in the Consolidated Statement of Comprehensive Income.

Trade payables are stated initially at fair value and subsequently measured at amortised cost.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Exceptional Items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

Deferred Tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred taxation liabilities are provided, using the liability method, on all taxable temporary differences at the reporting date. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where Jersey Oil and Gas Plc and its subsidiaries operate and generate taxable income. We periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.

Current Tax

Current tax is payable based upon taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Any Group liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Foreign Currencies

The functional currency of the Company and its subsidiaries is Sterling. Monetary assets and liabilities in foreign currencies are translated into Sterling at the rates of exchange ruling at the reporting date. Transactions in foreign currencies are translated into Sterling at the rate of exchange ruling at the date of the transaction. Gains and losses arising on retranslation are recognised in the Consolidated Statement of Comprehensive Income for the year.

Employee Benefit Costs

Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to contributions.

Share-Based Payments

Equity settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The total amount to be expensed is determined by reference to the fair value of the options granted:

   --           including any market performance conditions (for example, an entity's share price); 

-- excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time-period); and

-- including the impact of any non-vesting conditions (for example, the requirement for employees to save).

The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity settled employee benefits reserve.

Equity settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Exercise proceeds net of directly attributable costs are credited to share capital and share premium.

Share Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

3. Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors.

The Board considers that the Group operates in a single segment, that of oil and gas exploration, appraisal, development and production, in a single geographical location, the North Sea of the United Kingdom and do not consider it appropriate to disaggregate data further from that disclosed.

The Board is the Group's chief operating decision maker within the meaning of IFRS 8 "Operating Segments".

During 2021 and 2020 the Group had no revenue.

4. Financial risk management

The Group's activities expose it to financial risks and its overall risk management programme focuses on minimising potential adverse effects on the financial performance of the Group. The Company's activities are also exposed to risks through its investments in subsidiaries and it is accordingly exposed to similar financial and capital risks as the Group.

Risk management is carried out by the Directors and they identify, evaluate, and address financial risks in close co-operation with the Group's management. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange risks and investing excess liquidity.

Credit Risk

The Group's credit risk primarily relates to its trade receivables. Responsibility for managing credit risks lies with the Group's management.

A debtor evaluation is typically obtained from an appropriate credit rating agency. Where required, appropriate trade finance instruments such as letters of credit, bonds, guarantees and credit insurance will be used to manage credit risk.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group manages its liquidity through continuous monitoring of cash flows from operating activities, review of actual capital expenditure programmes, and managing maturity profiles of financial assets and financial liabilities.

Capital Risk Management

The Group seeks to maintain an optimal capital structure. The Group considers its capital to comprise both equity and net debt.

The Group monitors its capital mix needs and suitability dependent upon the development stage of its asset base. Earlier stage assets (pre-production) typically require equity rather than debt given the absence of cash flow to service debt. As the asset mix becomes biased to production then typically more debt is available. The Group seeks to maintain progress in developing its assets in a timely fashion. Given the Group's current cash position is insufficient to progress its assets to first oil it will be seeking to bring an industry partner into its assets in return for a capital (equity) contribution. This may be in the form of either cash or payment of some or all the Group's development expenditures. As the development progresses towards first oil, debt becomes available and will be sought in order to enhance equity returns. As at 31 December 2021 there are no borrowings within the Group (2020: Nil).

The Group monitors its capital structure by reference to its net debt to equity ratio. Net debt to equity ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowings less cash and cash equivalents. Total equity comprises all components of equity.

Maturity analysis of financial assets and liabilities

Financial assets

 
                    2021     2020 
                     GBP      GBP 
===============  =======  ======= 
Up to 3 months   233,864  446,082 
3 to 6 months          -   35,980 
Over 6 months     31,112  199,395 
===============  =======  ======= 
                 264,976  681,457 
===============  =======  ======= 
 

Financial liabilities

 
                      2021       2020 
                       GBP        GBP 
===============  =========  ========= 
Up to 3 months   2,232,325  1,069,620 
3 to 6 months            -          - 
Over 6 months            -          - 
===============  =========  ========= 
                 2,232,325  1,069,620 
===============  =========  ========= 
 

Lease liabilities

 
                    2021     2020 
                     GBP      GBP 
===============  =======  ======= 
Up to 3 months    31,028   46,712 
3 to 6 months     31,261   40,231 
Over 6 months    149,923  136,975 
===============  =======  ======= 
                 212,212  223,918 
===============  =======  ======= 
 

5. Employees and Directors

 
                                      2021       2020 
                                       GBP        GBP 
-------------------------------  ---------  --------- 
Wages and salaries*              2,207,384  1,841,230 
Social security costs**            215,267    145,605 
Share-based payments (note 19)     470,724    181,870 
Other pension costs                218,253    181,010 
===============================  =========  ========= 
                                 3,111,628  2,349,715 
-------------------------------  ---------  --------- 
 

*In addition, there were payments in lieu of notice and loss of office fees of GBP733,725.

** In addition, there were social security costs associated with the payments in lieu of notice and loss of office of GBP49,985.

Other pension costs include employee and Group contributions to money purchase pension schemes.

The average monthly number of employees during the year was as follows:

 
                        2021  2020 
                         GBP   GBP 
----------------------  ----  ---- 
Directors                  6     5 
Employees - Finance        1     1 
Employees - Technical     10     8 
======================  ====  ==== 
                          17    14 
----------------------  ----  ---- 
 
 
Directors Remuneration:                          2021       2020 
                                                  GBP        GBP 
==========================================  =========  ========= 
Directors' remuneration*                      938,465    878,100 
Directors' pension contributions to money 
 purchase schemes                              26,450     26,665 
Share-based payments (note 19)                207,534    153,816 
Benefits**                                     17,074     17,104 
==========================================  =========  ========= 
                                            1,189,523  1,075,685 
==========================================  =========  ========= 
 

The Director's remuneration is shown net of share-based payments.

*In addition, there were payments in lieu of notice and loss of office fees of GBP733,725.

** In addition, there were benefit costs associated with the payments in lieu of notice and loss of office of GBP13,197.

The average number of Directors to whom retirement benefits were accruing was as follows:

 
                                                                                    2021  2020 
                                                                                     GBP   GBP 
=======================  ===============================================================  ==== 
Money purchase schemes                                                                 2     2 
=======================  ===============================================================  ==== 
 

Information regarding the highest paid Director is as follows:

 
                                       2021     2020 
                                        GBP      GBP 
==================================  =======  ======= 
Aggregate emoluments and benefits   256,036  254,784 
Share-based payments                 74,707   52,470 
Pension contributions                25,000   25,000 
==================================  =======  ======= 
                                    355,743  332,254 
==================================  =======  ======= 
 
 

Key management compensation

Key management includes Directors (Executive and Non-Executive) and an advisor to the Board. The compensation

paid or payable to key management for   employee services is shown below: 
 
                                                              2021       2020 
                                                               GBP        GBP 
=================================================  ===============  ========= 
Wages and short-term employee benefits*                    992,204    895,203 
Share-based payments (note 19)                             207,534    153,816 
Pension Contributions                                       26,450     26,665 
-------------------------------------------------  ---------------  --------- 
                                                         1,226,188  1,075,684 
-------------------------------------------------  ---------------  --------- 
*In addition, there were payments in lieu 
 of notice and loss of office fees of GBP733,725 
 and associated benefit costs of GBP13,197. 
 

6. Net Finance Cost

 
                                        2021           2020 
                                         GBP            GBP 
=============================  =============  ============= 
Finance income: 
                               =============  ============= 
Interest received                      1,807         27,937 
=============================  =============  ============= 
                                       1,807         27,937 
-----------------------------  -------------  ------------- 
Finance costs: 
Interest paid                          (278)           (33) 
 Interest on lease liability         (5,820)        (8,229) 
=============================  =============  ============= 
                                     (6,098)        (8,262) 
=============================  =============  ============= 
Net finance income                   (4,290)         19,675 
=============================  =============  ============= 
 

7. Loss Before Tax

The loss before tax is stated after charging/(crediting):

 
                                                               2021     2020 
                                                                GBP      GBP 
==================================================  ===============  ======= 
Depreciation - tangible assets                               34,472   23,977 
Depreciation - right-of-use asset                           138,176  135,493 
Auditors' remuneration - audit of parent 
 company and consolidation                                   80,000   58,000 
Auditors' remuneration - audit of subsidiaries               27,000   20,000 
Auditors' remuneration - non-audit work (taxation 
 advice)                                                      3,150   16,000 
TGS Settlement                                                    -  637,028 
Foreign exchange gain                                       (6,027)  (5,600) 
==================================================  ===============  ======= 
 

In December 2020, the Group reached a settlement with TGS-Nopec Geophysical Company ASA ("TGS") pursuant to an agreement entered into with TGS on 9 February 2018. Under the agreement, TGS claimed uplift payments from JOG totalling US$1,050,838 in respect of: a) licence awards to Jersey Petroleum Limited ("JPL") in the Oil & Gas Authority's 31st Supplementary Offshore Licensing Round; and b) the acquisition by JPL of Equinor UK Limited's 70% interest in Licence P2170 (Verbier). The Group disputed the validity of both claims, following which two hearings took place in the Norwegian courts. Subsequent to these hearings and, on the basis of legal advice received, the Group agreed a final settlement payment to TGS of US$850,000 (GBP637,028).

8. Tax

Reconciliation of tax charge

 
                                                        2021         2020 
                                                         GBP          GBP 
===============================================  ===========  =========== 
Loss before tax                                  (4,225,317)  (2,781,931) 
Tax at the domestic rate of 19% (2020: 
 19%)                                              (802,810)    (528,567) 
Capital allowances in excess of depreciation     (1,330,468)    (957,549) 
Expenses not deductible for tax purposes 
 and non-taxable income                               91,330       35,704 
Deferred tax asset not recognised                  2,041,949    1,450,412 
===============================================  ===========  =========== 
Total tax expense reported in the Consolidated             -            - 
 Statement of Comprehensive Income 
===============================================  ===========  =========== 
 

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2021, or for the year ended 31 December 2020.

In April 2023, the rate of corporation tax will increase to 25% as announced in the March 2021 Budget.

The Group has not recognised a deferred tax asset due to the uncertainty over when the tax losses can be utilised. At the year end, the usable tax losses within the Group were approximately GBP57 million (2020: GBP46million).

   9.   Loss Per Share 

Basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

There is no difference between dilutive and ordinary earnings per share due to there being no dilutive shares in the period.

 
                                          Loss attributable    Weighted average 
                                   to ordinary shareholders           number of          Per share 
                                                        GBP              shares       amount pence 
=======================  ==================================  ==================  ================= 
Year ended 31 December 
 2021 
                         ========================================================================= 
Basic and Diluted EPS 
=======================  ==================================  ==================  ================= 
Basic & Diluted                                 (4,225,317)      29,171,548                (14.48) 
=======================  ==================================  ==================  ================= 
Year ended 31 December 
 2020 
Basic and Diluted EPS 
Basic & Diluted                                 (2,781,931)       21,829,227               (12.74) 
=======================  ==================================  ==================  ================= 
 
   10.           Intangible Assets 
 
                                       Exploration 
                                             costs 
                                               GBP 
=====================================  =========== 
Cost 
At 1 January 2020                       10,267,805 
Additions                                4,898,731 
-------------------------------------  ----------- 
At 31 December 2020                     15,166,536 
-------------------------------------  ----------- 
Additions                                6,970,670 
Exploration write-off/relinquishment     (447,812) 
-------------------------------------  ----------- 
At 31 December 2021                     21,689,394 
-------------------------------------  ----------- 
Accumulated Amortisation 
At 1 January 2020                          175,241 
Charge for the year                              - 
Amortisation on disposal                         - 
=====================================  =========== 
At 31 December 2020                        175,241 
-------------------------------------  ----------- 
At 31 December 2021                        175,241 
-------------------------------------  ----------- 
Net Book Value 
At 31 December 2021                     21,514,153 
-------------------------------------  ----------- 
At 31 December 2020                     14,991,295 
-------------------------------------  ----------- 
 

During the year, the Group relinquished licences P2497 Block 20/4c (Zermatt) and P2499 Block 21/2a (Glenn). Following undertaking a comprehensive technical and economic evaluation of licences P2497 and P2499 and meetings held with the North Sea Transition Authority ("NSTA"), the NSTA confirmed that it was satisfied that the Phase A Firm Commitments for both licences had been fulfilled. JOG has decided not to progress to the next licence phase, which would have required committing to a firm well in each of these two licence areas. Accordingly, the licences automatically ceased and determined at the end of Phase A of their Initial Term on 29 August 2021.

In 2020, the Group acquired an additional 70% working interest in licence P2170 (Verbier) in addition to the existing 18% equity interest and retained 100% working interests in the licences awarded pursuant to the NSTA's 31st SLR (2019), Licence P2498 (Buchan and J2), Licence P2499 (Glenn) and Licence P2497 (Zermatt). The Group was also awarded a 100% working interest in, and operatorship of, part-block 20/5e in the NSTA's 32 Offshore Licensing Round in 2020. Part-block 20/5e is incorporated within Licence P2498 (Buchan & J2) and is located within the Group's existing Greater Buchan Area.

In April 2021, the Group acquired an additional 12% working interest in P2170 following the acquisition of Cieco V&C (UK) Limited (now Jersey V&C Ltd), thereby resulting in the Group owning 100% of this licence which includes the Verbier oil discovery, some 6km from the Buchan oil field. The consideration for the acquisition included a completion payment of GBP150k and two future milestone payments, details of which can be found in note 18.

In line with the requirements of IFRS 6, we have considered whether there are any indicators of impairment on the exploration and development assets. Based on our assessment, as at 31 December 2021 there are not deemed to be indicators that the licences are not commercial and the carrying value of GBP21,514,153 continues to be supported by ongoing exploration and development work on the licence area with no impairments considered necessary.

11. Property, Plant and Equipment

 
                              Computer and office 
                                        equipment 
                                              GBP 
-------------------------  ---------------------- 
Cost 
At 1 January 2020                         143,582 
Additions                                  84,865 
At 31 December 2020                       228,447 
Additions                                       - 
At 31 December 2021                       228,447 
-------------------------  ---------------------- 
Accumulated Depreciation 
At 1 January 2020                         129,921 
Charge for the year                        23,977 
At 31 December 2020                       153,898 
-------------------------  ---------------------- 
Charge for the year                        34,472 
At 31 December 2021                       188,370 
-------------------------  ---------------------- 
Net Book Value 
At 31 December 2021                        40,077 
-------------------------  ---------------------- 
At 31 December 2020                        74,549 
-------------------------  ---------------------- 
 

12. Leases

Amounts Recognised in the Statement of financial position

 
                                2021              2020 
                                 GBP               GBP 
====================  ==============  ================ 
Right-of-use Assets 
                      ==============  ================ 
Buildings                    185,008           197,374 
====================  ==============  ================ 
                             185,008           197,374 
====================  ==============  ================ 
Lease liabilities 
Current                      129,200           122,648 
Non-Current                   83,012           101,270 
--------------------  --------------  ---------------- 
                             212,212           223,918 
====================  ==============  ================ 
 

The liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3%. The borrowing rate applied for 2021 remained at 3% and the leases relate to office space.

A new lease agreement was entered into in September 2021 with a lease end date of September 2023, this was in relation to the London office.

Amounts Recognised in the Statement of comprehensive income

 
                                                     2021      2020 
                                                      GBP       GBP 
==========================================  =============  ======== 
Depreciation charge of right-of-use asset 
                                            =============  ======== 
Buildings                                         138,176   135,493 
==========================================  =============  ======== 
                                                  138,176   135,493 
==========================================  =============  ======== 
Interest expenses (included in finance 
 cost)                                            (5,820)   (8,230) 
==========================================  =============  ======== 
 

13. Trade and other receivables

 
                                      2021     2020 
                                       GBP      GBP 
================================  ========  ======= 
Current: 
Other receivables                       30   91,020 
Value added tax                    233,835  161,111 
Prepayments and accrued revenue    119,249  149,309 
================================  ========  ======= 
                                   353,114  401,440 
================================  ========  ======= 
 

As at 31 December 2021, there were no trade receivables past due nor impaired.

14. Cash and cash equivalents

 
                              2021       2020 
                               GBP        GBP 
======================  ==========  ========= 
Cash in bank accounts   13,038,388  5,081,515 
----------------------  ----------  --------- 
 

The cash balances are placed with creditworthy financial institutions with a minimum rating of 'A'.

15. Called up share capital

 
Issued and fully paid: Number:            Nominal          2021          2020 
                                   Class    value           GBP           GBP 
------------------------------  --------  -------  ------------  ------------ 
32,554,293 (2020:21,829,227)    Ordinary       1p     2,573,395     2,466,144 
------------------------------  --------  -------  ------------  ------------ 
 

Ordinary shares have a par value of 1p. They entitle the holder to participate in dividends, distribution or other participation in the profits of the Company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and on a poll each share is entitled to one vote.

During the year 660,000 ordinary shares were issued to satisfy the exercise of share options which raised GBP778,357 (gross). An oversubscribed placing and subscription of shares raised a further GBP16.61m (gross) with a total of 10,065,066 ordinary shares issued.

   16.         Trade and other payables 
 
                                    2021       2020 
                                     GBP        GBP 
=============================  =========  ========= 
Current: 
Trade payables                 1,211,220    451,857 
Accrued expenses               1,021,105    465,291 
Other payables                         -     74,905 
Taxation and Social Security     371,381     77,567 
=============================  =========  ========= 
                               2,603,706  1,069,620 
=============================  =========  ========= 
 

17. Lease liabilities

 
                             2021            2020 
                              GBP             GBP 
------------------  -------------  -------------- 
Non-Current: 
                    =============  ============== 
Lease liabilities          83,012         101,270 
==================  =============  ============== 
                           83,012         101,270 
------------------  -------------  -------------- 
 

18. Contingent Liabilities

(i) 2015 settlement agreement with Athena Consortium: In accordance with a 2015 settlement agreement reached with the Athena Consortium, although Jersey Petroleum Ltd remains a Licensee in the joint venture, any past or future liabilities in respect of its interest can only be satisfied from the Group's share of the revenue that the Athena Oil Field generates and up to 60 per cent. of net disposal proceeds or net petroleum profits from the Group's interest in the P2170 licence which is the only remaining asset still held that was in the Group at the time of the agreement with the Athena Consortium who hold security over this asset. Any future repayments, capped at the unpaid liability associated with the Athena Oil Field, cannot be calculated with any certainty, and any remaining liability still in existence once the Athena Oil Field has been decommissioned will be written off. A payment was made in 2016 to the Athena Consortium in line with this agreement following the farm-out of P2170 (Verbier) to Equinor and the subsequent receipt of monies relating to that farm-out.

(ii) Equinor UK Limited: During 2020, JOG announced that it had entered into a conditional Sale and Purchase Agreement ("SPA") to acquire operatorship of, and an additional 70% working interest in Licence P2170 (Blocks 20/5b and 21/1d) from Equinor UK Limited ("Equinor"), this transaction completed in May 2020. The consideration for the acquisition consists of two milestone payments, which will be accounted for in line with the cost accumulation model, as opposed to contingent liabilities:

-- US$3 million upon sanctioning by the UK's North Sea Transition Authority ("NSTA") of a Field Development Plan ("FDP") in respect of the Verbier Field; and

   --    US$5 million upon first oil from the Verbier Field. 

The earliest of the milestone payments in respect of the acquisition is not currently anticipated being payable before the start of 2025.

(iii) ITOCHU Corporation and Japan Oil, Gas and Metals National Corporation: During 2020, JOG announced that it entered into a conditional Sale and Purchase Agreement ("SPA") to acquire the entire issued share capital of CIECO V&C (UK) Limited, which was owned by ITOCHU Corporation and Japan Oil, Gas and Metals National Corporation, this transaction completed in April 2021. The acquisition was treated as an asset acquisition rather than a business combination due to the nature of the asset acquired. There were no assets or liabilities acquired other than the 12% interest in licence P2170 (Verbier). The consideration for the acquisition includes a completion payment of GBP150k and two future milestone payments, which are considered contingent liabilities:

-- GBP1.5 million in cash upon consent from the UK's North Sea Transition Authority ("NSTA") for a Field Development Plan ("FDP") in respect of the Verbier discovery in the Upper Jurassic (J62-J64) Burns Sandstone reservoir located on Licence P2170; and

-- GBP1 million in cash payable not later than one year after first oil from all or any part of the area which is the subject of the Field Development Plan.

The earliest of the milestone payments in respect of the acquisition is not currently anticipated being payable before the start of 2025.

19. Share based payments

The Group operates several share options schemes. Options are exercisable at the prices set out in the table below. Options are forfeited if the employee leaves the Group through resignation or dismissal before the options vest.

Equity settled share-based payments are measured at fair value at the date of grant and expensed on a straight-line basis over the vesting period, based upon the Group's estimate of shares that will eventually vest.

The Group's share option schemes are for Directors, Officers and employees. The charge for the year was GBP470,725 (2020: GBP181,870) and details of outstanding options are set out in the table below.

 
                                               No. of                                                  No. of 
                                               shares                                                   shares 
                                              for which                             Options           for which 
                                               options                             lapsed/non          options 
          Exercise                           outstanding                            vesting          outstanding 
Date of    price    Vesting   Expiry          at 1 Jan         Options   Options     during           at 31 Dec 
  Grant   (pence)     date     date             2021            issued  Exercised   the year             2021 
Mar 2011    100     Vested   Mar 2021                   3,164        -          -     (3,164)                        - 
Mar 2011   4,300    Vested   Mar 2021                   5,809        -          -     (5,809)                        - 
                      Mar 
Mar 2011   4,300     2014    Mar 2021                   4,370        -          -     (4,370)                        - 
                      Mar 
Mar 2011   4,300     2015    Mar 2021                   5,809        -          -     (5,809)                        - 
                      Jul 
Jul 2011   4,300     2011    Jul 2021                     523        -          -       (523)                        - 
                      Jul 
Jul 2011   4,300     2012    Jul 2021                     523        -          -       (523)                        - 
                      Jul 
Jul 2011   4,300     2014    Jul 2021                     523        -          -       (523)                        - 
                      Dec 
Dec 2011   2,712     2012    Dec 2021                   1,650        -          -     (1,650)                        - 
                      Dec 
Dec 2011   2,712     2014    Dec 2021                   1,650        -          -     (1,650)                        - 
                      May 
May 2013   1,500     2014    May 2023                   9,500        -          -           -                    9,500 
                      May 
May 2013   1,500     2015    May 2023                   9,500        -          -           -                    9,500 
                      Nov 
Nov 2016    110      2016    Nov 2021                 246,667        -  (246,667)           -                        - 
                      Nov 
Nov 2016    110      2017    Nov 2021                 246,667        -  (246,667)           -                        - 
                      Nov 
Nov 2016    110      2018    Nov 2021                 166,667        -  (166,667)           -                        - 
                      Apr 
Apr 2017    310      2017    Apr 2022                  20,000        -          -           -                   20,000 
                      Apr 
Apr 2017    310      2018    Apr 2022                  20,000        -          -           -                   20,000 
                      Apr 
Apr 2017    310      2019    Apr 2022                  20,000        -          -           -                   20,000 
                      Jan 
Jan 2018    200      2021    Jan 2025                 420,000        -          -           -                  420,000 
                      Jan 
Jan 2018    200      2018    Jan 2023                  76,666        -          -           -                   76,666 
                      Jan 
Jan 2018    200      2019    Jan 2023                  76,667        -          -           -                   76,667 
                      Jan 
Jan 2018    200      2020    Jan 2023                  70,000        -          -           -                   70,000 
                      Nov 
Nov 2018    172      2021    Nov 2025                 150,000        -          -           -                  150,000 
                      Jan 
Jan 2019    175      2020    Jan 2026                  88,333        -          -           -                   88,333 
                      Jan 
Jan 2019    175      2021    Jan 2026                  88,333        -          -           -                   88,333 
                      Jan 
Jan 2019    175      2022    Jan 2026                  81,666        -          -    (13,333)                   68,333 
                      Jan 
Jan 2019    175      2020    Jan 2024                  11,667        -          -           -                   11,667 
                      Jan 
Jan 2019    175      2021    Jan 2024                  11,667        -          -           -                   11,667 
                      Jan 
Jan 2019    175      2022    Jan 2024                  11,667        -          -           -                   11,667 
                      Jan 
Jun 2019    200      2021    Jun 2029                 120,000        -          -           -                  120,000 
                      Jun 
Jun 2019    110      2019    Jun 2029                  40,000        -          -           -                   40,000 
                      Jan 
Jan 2021    155      2022    Jan 2028                       -   83,333          -           -                   83,333 
                      Jan 
Jan 2021    155      2023    Jan 2028                       -   83,333          -           -                   83,333 
                      Jan 
Jan 2021    155      2024    Jan 2028                       -   83,334          -           -                   83,334 
                      Mar 
Mar 2021    210      2022    Mar 2026                       -   11,666          -           -                   11,666 
                      Mar 
Mar 2021    210      2023    Mar 2026                       -   11,667          -           -                   11,667 
                      Mar 
Mar 2021    210      2024    Mar 2026                       -   11,667          -           -                   11,667 
                      Mar 
Mar 2021    210      2022    Mar 2028                       -  162,334          -    (25,000)                  137,334 
                      Mar 
Mar 2021    210      2023    Mar 2028                       -  162,333          -    (25,000)                  137,333 
                      Mar 
Mar 2021    210      2024    Mar 2028                       -  162,333          -    (25,000)                  137,333 
                      Nov 
Nov 2021    147      2022    Nov 2028                       -  233,334          -           -                  233,334 
                      Nov 
Nov 2021    147      2022    Nov 2028                       -  233,333          -           -                  233,333 
                      Nov 
Nov 2021    147      2022    Nov 2028                       -  233,333          -           -                  233,333 
          --------  -------  --------  ----------------------  -------  ---------  ----------  ----------------------- 
                                                                                        Total                2,709,333 
 

The weighted average of the options granted during the year was determined using a Black-Scholes valuation. The significant inputs into the model were the mid-market share price on the day of grant as shown above and an annual risk-free interest rate of 2%. The volatility measured at the standard deviation of continuously compounded share returns is based on a statistical analysis of daily share prices from the date of admission to AIM to the date of grant on an annualised basis. The weighted average exercise price for the options granted in 2021 was 171 pence, the weighted average remaining contractual life of the options was 7 years, the weighted average volatility rates was 128.58% and the dividend yield was nil. For schemes and scheme rules, please refer to the Remuneration Report.

20. Related undertakings and ultimate controlling party

The Group and Company do not have an ultimate controlling party or parent Company.

 
                                                 County of Incorporation 
  Subsidiary                       % owned                                      Principal Activity        Registered 
                                                                                                          Office 
--------------------------  --------------  ----------------------------  ------------------------  ---------------- 
Jersey North Sea 
 Holdings Ltd                    100%            England & Wales              Non-Trading               1 
  Jersey Petroleum 
   Ltd                           100%            England & Wales              Oil Exploration           1 
           Jersey V&C Ltd        100%            England & Wales              Oil Exploration           1 
Jersey E & P Ltd                 100%            Scotland                     Non-Trading               2 
  Jersey Oil Ltd                 100%            Scotland                     Non-Trading               2 
  Jersey Exploration 
   Ltd                           100%            Scotland                     Non-Trading               2 
Jersey Oil & Gas 
 E & P Ltd                       100%            Jersey                       Management services       3 
--------------------------  --------------  ----------------------------  ------------------------  ---------------- 
 

Registered Offices

   1.   10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE 
   2.   6 Rubislaw Terrace, Aberdeen, AB10 1XE 
   3.   First Floor, Tower House, La Route es Nouaux, St Helier, Jersey JE2 4ZJ 

21. Notes to the consolidated statement of cash flows

Reconciliation of Loss Before Tax to Cash Used in Operations

 
                                                            2021         2020 
                                                             GBP          GBP 
---------------------------------------------------  -----------  ----------- 
Loss for the year before tax                         (4,225,317)  (2,781,931) 
Adjusted for: 
Depreciation                                              34,472       23,977 
Impairments                                              447,812            - 
Depreciation right-of-use asset                          138,176      135,493 
Share-based payments (net)                               470,724      181,870 
Finance costs                                              6,098        8,262 
Finance income                                           (1,807)     (27,937) 
===================================================  ===========  =========== 
                                                     (3,129,842)  (2,460,266) 
(Increase)/decrease in trade and other receivables        99,856     (27,352) 
Increase in trade and other payables                   1,534,087      327,454 
===================================================  ===========  =========== 
Cash used in operations                              (1,495,899)  (2,160,164) 
---------------------------------------------------  -----------  ----------- 
 

Cash and cash equivalents

The amounts disclosed on the consolidated Statement of Cash Flows in respect of Cash and cash equivalents are in respect of these statements of financial position amounts:

Year ended 2021

 
                               31 Dec 2021   31 Dec 2020 
                                       GBP           GBP 
==========================  ==============  ============ 
Cash and cash equivalents       13,038,388     5,081,515 
==========================  ==============  ============ 
 

Year ended 2020

 
                            31 Dec 2019     1 Jan 2019 
                                    GBP            GBP 
==========================  ===========  ============= 
Cash and cash equivalents     5,081,515     12,318,536 
==========================  ===========  ============= 
 
 
                                        Analysis of net cash 
--------------------------  --------------------------------------------- 
                            At 1 Jan 2021       Cash flow  At 31 Dec 2021 
                                                      GBP             GBP 
--------------------------  -------------  --------------  -------------- 
Cash and cash equivalents       5,081,515       7,956,873      13,038,388 
--------------------------  -------------  --------------  -------------- 
Net cash                        5,081,515       7,956,873      13,038,388 
--------------------------  -------------  --------------  -------------- 
 

22. Post balance sheet events

The Group has considered its supply chain and activities in light of the Russia/Ukraine war and does not believe that there will be any impact on its business .

23. Availability of the 2021 Annual Report

A copy of the full annual report will be made available for inspection at the Company's registered office during normal business hours on any weekday. The Company's registered office is at 10 The Triangle, ng2 Business Park, Nottingham NG2 1AE. A copy can also be downloaded from the Company's website at www.jerseyoilandgas.com. Jersey Oil and Gas plc is registered in England and Wales, with registration number 7503957.

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END

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April 28, 2022 02:02 ET (06:02 GMT)

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